In a survey of 525 U.S. broadband households, faster Net access and a freed phone line influenced consumers' decision to upgrade from their dial-up accounts significantly more than watching streaming video and downloading music. The study, conducted by market research firm Strategy Analytics, also showed that broadband households check e-mail and search for information more than access audio or video content.
"The broadband market today in the U.S. is still being driven heavily by access and basic features and availability rather than a move to what we've all been waiting for--where premium services and content would become more important," said James Penhune, a Strategy Analytics analyst.
The findings fly in the face of lofty predictions among media and Internet companies that video clips and streaming music will be the primary driver for broadband. While broadband penetration has reached 19 million U.S. households, multimedia content still plays second fiddle to narrowband applications such as e-mail.
AOL Time Warner's America Online unit, Microsoft's MSN, and Yahoo all have stakes in broadband content and have pinned the growth of their services on broadband adoption. The companies believe their mix of online content and services will prompt consumers to buy subscriptions on top of broadband access provided by third parties.
So far, cable companies such as Comcast, Time Warner Cable and Cox Communications are driving household adoption of broadband. Phone companies that provide DSL (digital subscriber line) access lag behind cable companies in terms of market share. Baby Bells such as Verizon Communications and SBC Communications are partnering with Web portals MSN and Yahoo, respectively, in hopes of luring consumers with the portals' mix of services.
AOL, MSN and Yahoo all want to partner with DSL and cable providers, but deals have been hard to come by. Yahoo last week struck anthat mirrored its under which access and advertising revenue will be shared by both parties.
However, the BT agreement came more than a year and a half after the SBC deal. Only AOL has struck a deal with cable companies Comcast and its cousin Time Warner Cable.
The study also revealed consumers' satisfaction for particular features of their broadband services. Respondents said they were most satisfied with the access speed of their broadband service, followed by reliability, content and services, customer support, and value for money.
While broadband households seek practical attributes, multimedia content hasn't necessarily fallen by the wayside. About 45 percent of the respondents said they would pay for a streaming audio, music download or streaming video service.
"I think that's a development that's going to happen," Strategy Analytics' Penhune said about expected demand for content. "But the market is still going up strongly on pent-up demand."